Broker Check

Market News & Commentary - From The Desk Of David Loesch 11.18.2021

November 18, 2021
  • Morgan Stanley said that the MUNI market will post decent returns for 2022 and that debt issuance will fall due to the government stimulus. They are calling for moderate volitivity and, as a result, "opportunity" in the market from a retail and trading perspective. They are expecting sales to be down 11%-13% in 2022. I agree on this point based on everything we know at this time dealing with the stimulus package. Investors seek higher returns; however, they want to keep a significant portion in MUNI debt to offset any volatility they might see in other markets.
  • Senator Bernie Sanders is working on proposed legislation to set an income threshold for an unlimited state and local tax deduction (SALT) while letting high earners continue to deduct $10K from their FED taxes. Sanders will aim to set the threshold at a level as high as possible, so it does not add to the deficit. This issue will not impact our markets too much. However, if the SALT cap remains at $10K for higher earners, this will incentivize buyers to buy tax-exempt paper to continue to build their MUNI portfolio. I suspect a compromise at some income threshold, and the SALT deductions will not change. This point should have a positive impact on the Fixed Income MUNI market.
  • Bond buyers' demand for yields has fueled a surge in the sale of risky municipal bonds. These bond issues are sold with relatively high minimum investments, almost exclusively to institutional investors. So far this year, issuers have marketed $30.7B in bonds with a minimum denomination of $100M; this is a record. Most of these bonds are uninsured and lower-rated. The min denomination is designed to keep these bonds out of retail hands while paying about 3-5bps more than a standard bond with similar credit ratings. There will be plenty of this type of securities to choose from over the next week, some with min denominations of $500M as well. The DRL Group avoids such issues due to illiquidity.
  • October retail sales figures show a substantial lift from online shopping.  Retail sales advanced 1.7% in October, slightly more robust than the projection of 1.4%. Flat restaurant sales suggest that virus concerns have prompted consumers to channel more spending to online stores. Powell continues to promote "give this a year," and we will see where we are on inflation and sales.  I tend to agree with this theory. A ton of pent-up demand will be in the system for at least a year. Inflation projections will continue to run "high" as we move into 2022.
  • MTA plans to delay scheduled rate hikes for six months and suspend any potential service cuts indefinity. The agency will receive billions of dollars from the $1T deal signed into law. New York will receive $10.5B for transit infrastructure, with the bulk going to MTA to finance capital projects otherwise financed through bonds. This will be a common trend as we move through 2022.


David Loesch

605-B Park Grove

Katy, TX 77450

866.664.4040 (toll-free)

281.398.8600 (direct)

281.398.8607 fax


This report has no regard to the specific investment objectives, financial situation, or particular needs of any specific recipient. This report is based on information obtained from sources believed to be reliable, but no independent verification has been made, nor is its accuracy or completeness guaranteed. This report is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Opinions expressed herein are subject to change without notice. The division, group, subsidiary, or affiliate of NewEdge Securities, Inc., is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. NewEdge Securities, Inc. accepts no liability for any loss or damage of any kind arising out of the use of this report. Please contact your tax advisor regarding the suitability of tax-exempt investments in your portfolio. Income from municipals may be subject to state and local taxes as well as the Alternative Minimum Tax. Corporate and Municipal securities are subject to gains/losses based on the level of interest rates, market conditions, and credit quality of the issuer. As with any security, there is an inherent market risk possibility as to principal if the security is not held to maturity. The non-rated bonds (NR) should be considered for investment by knowledgeable and sophisticated investors. Additional information will be made available upon request.

Securities are offered through NewEdge Securities, Inc., a registered Broker-Dealer, Member FINRA/SIPC.

The DRL Group is not a registered entity or a subsidiary or control affiliate of NewEdge Securities, Inc.

Bonds are subject to market and interest rate risk if sold prior to maturity. Prices and availability may change at any time without notice. Insured bonds are subject to the claims-paying ability of the insurance company.

Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, change of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time-sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the Firm, its officers, agents, and employees. Unless expressly stated in this e-mail, nothing in this message should be construed as a digital or electronic signature.